Anglo American plc notification: De Beers Société Anonyme interim results 2011
26 July, 2011
Interim results for the six months ended 30 June 2011
Strong price growth leads to record H1 DTC sales
Sustained demand for diamond jewellery in retail markets of Far East and US
| US Dollars millions | Variance | ||
|---|---|---|---|
| Half year 30 June 2011 |
Half year 30 June 2010 |
||
| Total sales | 3 887 | 2 979 | 30% |
| EBITDA | 1 183 | 762 | 55% |
| Profit before finance charges and taxation | 1 019 | 586 | 74% |
| Free cash flow | 469 | 620 | -24% |
| Net debt (excluding shareholders’ loans) | 1 450 | 1 983 | 27% |
2011 Interim Operating Performance
- Record EBITDA of almost US$1.2 billion is a 55% increase over 2010 (US$762 million), reflecting the impact of excellent price growth during the period.
- Sales of rough diamonds by the Diamond Trading Company in H1 2011 were US$3.5 billion (including those through joint ventures) – a 33% increase compared with 2010 – driven by price growth of approximately 35%. This is the highest ever sales figure recorded for the first half of the year, buoyed by continued retail demand from the Indian and Chinese consumer markets and stronger than expected demand in America.
- Carats recovered during the period amounted to 15,53 million, in line with H1 2010 (15,43 million carats).
- Free cash flow of US$469 million is a reduction of 24% on last year due to the timing of stock purchases in the current period compared with 2010.
DIRECTORS’ COMMENT
Commitment to safety remains De Beers’ most important priority. Sadly, there have been three loss of life incidents in the Family of Companies during the first half – two at Namdeb and one at Debswana. We extend our sincere condolences to the families of all those concerned. Comprehensive safety reviews are being carried out at all operations in the Family of Companies.
Sales during the period have been exceptional, driven mainly by continued growth in the Middle East, Indian and Asian retail markets and their impact on rough price growth. De Beers has continued to focus on efficiency improvements and on maintaining a lower sustainable level of overhead base, which has resulted in a favourable impact on the bottom line. In the first six months of 2011, De Beers’ production totalled 15,53 million carats (H1 2010: 15,43 million) reflecting the impact of maintenance and asset management difficulties and, to an extent, excessive rainfall in southern Africa.
In downstream activities, Forevermark (a diamond brand owned by the De Beers Group) continues its expansion into the core retail markets of China, Hong Kong and Japan, and has recently launched in India, Singapore and the Caribbean. The Forevermark brand is now available from a small number of stores in the US, with further expansion planned later this year. During H1, De Beers Diamond Jewellers (De Beers’ joint venture with LVMH) announced the strategic launch of the brand in China with the opening of its first mainland store in Beijing, its first store in Kazakhstan in Almaty and a new store in Dubai at Dubai Mall. The company will continue its expansion in 2011 with the opening of further stores in mainland China and a second store in Hong Kong. Element Six recorded a good first half performance in respect of both sales and profitability, with robust demand across its product ranges. Operating performance was impacted by, inter alia, operating challenges and a weak US dollar, but Element Six is well positioned for the remainder of the year.
Debswana’s Jwaneng mine Cut-8 extension project is progressing satisfactorily, on schedule and on budget. De Beers Canada recently completed a six month optimisation study on the Snap Lake Mine to more economically extract this complicated, but promising, ore body that has a forecast 20-year life-of-mine.
Disposals of assets have continued in the period, and, in January, De Beers Consolidated Mines (DBCM) announced that it had entered into an agreement with Petra Diamonds to sell Finsch mine as a going concern for a consideration of R1.425 billion (US$210 million), plus assumption of rehabilitation liabilities. In May, DBCM announced that it had entered into an agreement to sell Namaqualand Mines to Trans Hex in a transaction valued at R225 million. This completes DBCM’s asset disposal programme.
In May, De Beers and the Government of the Republic of Namibia (GRN) announced a new agreement which will allow GRN to increase its effective shareholding in De Beers Marine Namibia from 15% to 50% through the establishment of a new 50/50 joint venture holding company. This will not change marketing arrangements, and all diamond production from Namdeb will continue to be sorted, valued and marketed exclusively by the DTC together with Namibia Diamond Trading Company, which is also a 50/50 joint venture between the GRN and De Beers.
Outlook
Despite the ongoing turmoil with the global economy, we are encouraged by the continued strong growth in price and demand during the first six months of 2011. De Beers is confident that the exceptional growth in retail markets in India and Asia will continue to drive demand for diamonds. Reports from the recent JCK trade show indicate that the all-important Christmas season in the US, and Diwali, are set to be strong.
Management Change
At a De Beers sa Board Meeting in Luxembourg on 19th July 2011, Philippe Mellier was appointed CEO of the De Beers Group. After almost 20 years with De Beers Group, Stuart Brown (Chief Financial Officer), announced that he would be stepping down from the Board with effect from the end of July.